Daily Analysis - 08/04/2009


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Today’s US Dollar Trading

• USD holds gains in a corrective rally, respects S/R
• Volumes lighter on the move
• Confirmed sovereign interest

Overnight Preview

• Look for the USD to remain two-way
• Technical action likely

Looking Ahead to Wednesday
All times Eastern (-5 GMT)
• 10:00am USD Wholesale Inventories m/m
• 10:30am USD Crude Oil Inventories
• 2:00pm USD FOMC Meeting Minutes

The USD held gains today as risk-aversion in equities prompted dollar-buying pushing the majors into key S/R at the start of the day. Although the Greenback is higher across the board today volumes were lighter and traders noted quality buying of the majors into the lows. Confirmed sovereign and semi-official names were seen buying EURO and GBP on the dips holding those pairs off their early New York lows. GBP low prints at 1.4580 was not challenged in New York today and the rate lifted to a two-pip high at 1.4780 before settling back to the 1.4720 area; traders note stops in-range above the 1.4720 area seen as daily resistance and with the rate holding gains from the start of New York traders are expecting further gains overnight despite weakness in equities seen to start the week. EURO low prints overnight at 1.3226 held in two-way action with the rate lifting to 1.3280 area before settling back around the 1.3250 area; traders note large names and official interest on the dip under the 1.3250 area with more bids said to be ready on any test of the 1.3220 area overnight. EURO is holding firm above the 100 bar MA which is a strong technical signal to most chart watchers. USD JPY was unable to extend the Monday rally with a high print at 101.12 overnight; lows were not challenged at the 99.84 area in New York but the rate is attracting bids on dips. Ending the day around the 100.35 area traders note that the rate is likely to suffer a correction after almost no selling seen on the run-up to the 101.50 area but heavy offers seen yesterday above 101.00; possibly the late longs are system traders and momentum accounts. USD/CHF is holding the 1.1400 handle after dropping to the 1.1380 area during New York trade; low prints at 1.1344 failed to trigger stops rumored to be resting around the 1.1320 area but traders expect a test of the lows overnight. USD/CAD failed to hold above the 1.2400 handle after scoring highs in New York at the 1.2486 area in early trade; low prints are still 1.2329 missing stops around the 1.2320 area and the rate closes around the 1.2370 area. Across the board the USD rally today has failed to extend gains suggesting that despite risk-aversion trade today this firmness is likely a corrective rally rather than the start of a move higher. Although many traders remain bullish USD for the near-term the rallies seem to lack conviction; further strength is likely to be offered and aggressive traders need to see this rally as a selling opportunity. Look for the USD to remain two-way overnight with any strength to be on light volume and holding under resistance. With a light economic calendar ahead the action should be technical for the most part.


Resistance 3: 1.5040/50
Resistance 2: 1.5000
Resistance 1: 1.4950
Latest New York: 1.4736
Support 1: 1.4650
Support 2: 1.4580
Support 3: 1.4550

Rate falls through stops layered under the 1.4650 area for lows on support at 1.4580; pullback being bought by large names traders say. Aggressive traders can look to re-set longs on the dip; stops above the market from late shorts around 1.4720 forex signals area cleared today. Traders note support is likely firm at the 1.4450 area as expected. Close over 1.4900 argues for further gains but tech resistance is firm ahead of 1.5000. Overhead target of the 1.5000 area likely to trade but expect pressure. Traders feel the 23-year lows will likely remain secure. The shorts may have lost control of the market above the 1.4440 area now and if that is the case a test of the 1.5000 area is almost a done-deal. Traders report stops in-range adding for two-way action.
Data due Wednesday: All times EASTERN (-5 GMT)
5:30am GBP BRC Shop Price Index y/y


Resistance 3: 1.3520
Resistance 2: 1.3480
Resistance 1: 1.3420
Latest New York: 1.3275
Support 1: 1.3220
Support 2: 1.3180
Support 3: 1.3150

Rate consolidates but is capped ahead of 1.3580 with stops likely above 1.3600 now; pullback a buying opportunity and expect a brief dip. Rate is solid above the 100 day MA. Foothold over the 1.3500 handle needed to extend to the upside. Support is solid under 1.3330 area. Rate likely has stops building in both directions; Action remains two-way; any move lower is likely supported on dips. Overhead resistance at 1.3330/50 area back in play as initial support expected fails. Aggressive traders can ADD on a dip. Possibly more official and semi-official bids overnight with traders noting Asian names on the bid. Long-term bulls are likely still in control of the market and this significant pullback is a buying opportunity in my view.
Data due Wednesday: All times EASTERN (-5 GMT)
2:00am EUR German Trade Balance
2:45am EUR French Trade Balance
6:00am EUR German Factory Orders m/m

Join us for the Afternoon US Dollar Wrap-Up daily at 3:15 pm Central/Chicago time (GMT -6)

Analysis Provided by: - Written by Jason Alan Jankovsky

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